What To Watch For In TripAdvisor’s Q4 2016 Earnings

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TripAdvisor, the largest travel review website in the world, is slated to release its Q4 2016 earnings results on February 16th. TripAdvisor currently boasts of around 1.9 million accommodations, 4.2 million restaurants,  and 730,000 attractions on its platform with over 390 million average monthly unique visitors visiting its website. Though the company’s non-hotel segment is carrying on with a stellar performance, its hotel segment (contributing to ~80% of the company’s revenues) mainly driven by its Instant Booking platform, is currently lagging behind on account of lukewarm user response. The Instant Booking platform has been confusing to use at times and it also kept showing inconsistencies. These might be possible reasons for user reluctance. However, currently, TripAdvisor has managed to rope in both Priceline and Expedia on the Instant Booking Platform. Also, 9 out of the top 10 global hotel chains now feature on Instant Booking. We believe once it overcomes its teething problems Instant Booking indeed will be a major growth driver for the company.

Instant Booking Platform Might Start Its Recovery Soon

In the first three quarters of 2016, TripAdvisor’s Instant Booking platform had been the main reason behind its weak performance. The lack of user traction on the platform led to a sharp decline in TripAdvisor’s revenues per hotel shopper to the extent where most of its peers are earning almost 4-5 times more revenue per shopper. Most people still consider TripAdvisor to be a metasearch platform and hence they browse through hotels on TripAdvisor’s website and then go on to other OTAs or independent hotel websites to make their bookings. Since the company is still investing on the booking platform to make it more user friendly with enhanced features, the margins are expected to remain dampened for some time.

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However, Instant Booking seems to have won the confidence of some of the major industry players. Currently, 9 out of the top ten global hotel chains are on its platform, with Hilton being the latest to join it towards the beginning of 2017.  The only one left currently is the Intercontinental Hotels Group.

Also on the OTA front, after Priceline, now Expedia also joined its Instant Booking platform (currently only on desktop sites in the U.S.). Along with a significant growth of accommodations available on the platform, Expedia’s inclusion is also expected to increase Instant Booking’s credibility in the eyes of online travel bookers and might grow Instant Booking’s user acceptance to a significant extent. Also, the presence of two OTA leaders might provide Instant Booking with the advantage of providing the lowest prices along with more options to choose from, and hence attract a larger number of travel bookers.

The Non-Hotel Segment Is Expected To End The Year On A Successful Note

Each component of TripAdvisor’s non-hotel segment has been growing well. TripAdvisor’s continued acquisitions of vacation rentals, restaurant booking sites, and other attraction related services helps the continuous growth of its non-hotel business. Viator, its attraction booking website, and TheFork, its restaurant booking website, are among the largest aggregators in the world. According to some experts, TripAdvisor’s non-hotel business, including attractions, restaurant reservations, and vacation rentals has the potential to grow by 118% between 2015 to 2018 to amount to a $500 million business. Additionally, some experts predict that TripAdvisor’s vacation rental business might also have the potential to surpass market leaders such as Expedia’s HomeAway and Airbnb. TripAdvisor’s platform provides travelers with the convenience of booking everything on the same platform after checking out their reviews.

Some of the company’s recent investments in this segment are as follows:

  • In July 2016, TripAdvisor upgraded its flight metasearch option with the launch of a new airline review platform, an enhanced flights search service, and the beta launch of “flyscore” — a 1 to 10 rating system for every flight based on traveler reviews, to measure the quality of flight experiences, the in-flight amenities, and the duration of the travel.
  • TripAdvisor acquired New York-based Citymaps in August 2016. Citymaps is a map-based guide for things to do in a city. This acquisition is expected to bolster its tours and attraction platform, Marketplace.
  • In December 2016, TripAdvisor decided to be the lead investor in the Series B funding round worth $5.2 million for Traxo, a company that collects data in the business travel domain. Traxo helps travel service providers in tracking off-platform bookings and provides insights into travel spends by consumers. Through this move, TripAdvisor might further expand the array of booking options on its Instant Booking platform with the presence of services for business travelers.

Have more questions about TripAdvisor? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for TripAdvisor

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